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Dominican Manufacturing Declines in Post-Quota Era

The Dominican Republic loses ground to China and other Asian nations.

Women working at a lingerie factory in a Dominican Republic free trade zone.

GENEVA — The textiles and apparel sector in the Dominican Republic has recorded a sharp contraction in exports in the post-quota era, mainly because of losing sales in the U.S. — its biggest market — to more competitive suppliers from China and other Asian nations, a World Trade Organization report said.

The sector, dominated by apparel production and located in the Dominican Republic’s 53 free trade zones, has “found it difficult to adjust to a more competitive global environment,” the study said.

Based on feedback from Dominican authorities, the WTO said “the end of quotas has led to a cutback in employment in free zones where some 60,000 jobs were lost between 2005 and 2007.”

During the era of quota restraints that ended in 2005, the country’s industry benefited from duty free and quota free access to the U.S. market as a participant in the Caribbean Basin Initiative program.

“For many years, our relationship with the Dominican Republic was driven by unilateral trade preferences that the U.S. provides through the CBI trade preferences program,” said David Shark, deputy chief of the U.S. mission to the WTO, said during a session reviewing the country’s trade regime. “The Dominican Republic is our largest trading partner in the Caribbean Basin region, with $10.3 billion in two-way trade in goods in 2007.”

The sector secured similar market access benefits more recently under as part of the Central American Free Trade Agreement.

Between 2001 and 2006, labor productivity in the apparel and textile sector increased at an average annual rate of 6.5 percent.

WTO trade analysts said the island nation’s apparel sector has lost ground primarily to more price competitive exporters from China, and more recently from Vietnam and Cambodia. In 2007, the country’s exports of apparel to the U.S. declined 32 percent to $1.08 billion after a contraction of 16 percent in 2006, according to WTO trade statistics. Last year, the U.S. was the destination for almost 77 percent share of its apparel exports valued at $1.3 billion.

The Dominican Republic’s ambassador to the WTO, Luis Manuel Piantini, said since 2005, there has been a 36 percent decline in the value of apparel exports.

The WTO report noted that in 2006, apparel and accessories accounted for a 24.8 percent share of the country’s merchandise exports valued at $6.7 billion, down from 32.7 percent share in 2004 and 40.3 percent in 2002. The U.S. was the destination for almost 63 percent of the country’s goods exports.

The report said that the share of singlets, briefs, pajamas, bathrobes and dressing gowns in the Dominican Republic’s goods exports dropped to 5.6 percent in 2006, down from 9.3 percent in 2005 and 10.7 percent in 2002. Men’s and boys’ trousers, bib and brace overalls, and breeches and shorts share of merchandise exports stood at 5.3 percent in 2006, down from 10.4 percent in 2004 and 13.4 percent in 2002.

Contrary to the problems faced by the apparel sector, Piantini said the economy, which underwent reforms between 2005 and 2007, grew on average by 9.8 percent, Despite the global downturn, the economy in the first nine months of this year grew 5.4 percent.

The WTO study said that in contrast to the difficulties faced by apparel, some other sectors, such as jewelry, medical products and electronics, have notched dynamic performances. In 2007, textiles and apparel accounted for 30 percent share of free zones’ exports valued at $4.5 billion, or about 63 percent of export value. This represents a decline from 37.1 percent share in 2006, 40.1 percent in 2005 and 45.3 percent share in 2004, and a high 51.6 percent in 2001.

In 2006, textiles and apparel accounted for 54 percent of employment in the free zones. Senior Dominican Republic trade officials said the government has introduced a $30 million program to modernize the apparel sector. It has also ushered in a new law, under which apparel companies based outside the free zones are entitled to the same benefits, the same officials said.